Q With end of Financial Year fast approaching, what Superannuation Concession are available that my wife and I should consider? I am 45 and work full time earning $140,000 p.a. My wife is 43 and works Permanent part time and earns $34,000.
A Your end of Financial year planning really should begin on 1 July so you give yourself the full financial year to plan and take advantage of opportunities to save more for retirement and reduce the impact of tax.
In the remaining 3 weeks of this Financial year, here are some opportunities you may like to consider.
Assuming you are receiving 9.5% Employer Superannuation support, you could make Salary Sacrifice contributions to your Superannuation. Your age based annual limit (Concessional Contribution Cap) on employer Superannuation contributions is $30,000. Allowing for your current employer contributions of $13,300 a year, you could Salary Sacrifice an additional $16,700 a year. Salary sacrifice contributions are taxed at 15% in the fund as opposed to your Marginal Tax Rate of 37% + Medicare levy. The tax saving is the difference between the two tax rates; approximately 24% or around $4,000. However your contributions will be lock within the Superannuation system.
Talk to your payroll department to see if in the time remaining this Financial year, you could forego salary and have that income made as an Employer contribution to your fund. Salary Sacrifice contributions are ideally planned over the entire Financial year to avoid this type of last minute catch up.
Please be careful not to exceed the contribution limits as additional tax will apply to the excess contribution. Note also that under the proposed Budget changes, from 1 July 2017 your Concessional Contribution Cap will reduce to $25,000.
Your wife would qualify for the Government Superannuation Co-contribution. As she earns less than $36,021, if she makes a personal Non-concessional (after tax) contribution of up to $1,000 to her Superannuation fund, the Government will contribute up to $500 as a co-payment. There is a sliding scale of Government support for income above $36,021 and it phases out completely when income reaches $51,021 or more.
You do not need to apply for the Super co-contribution. The ATO will automatically calculate the appropriate amount and deposit this to your wife’s Superannuation fund after she declares the contribution in her tax return and lodges the return for the year she makes the contribution.
You could make a Spouse contribution to your wife’s Superannuation fund. As your wife’s income is greater than $10,800, you will be ineligible for the 18% tax offset on contributions made up to $3000. Whilst you won’t receive tax benefits or additional co-contributions by doing so, you will increase the size of your wife’s Superannuation fund which will ultimately benefit her retirement benefits. Note under the proposed Budget changes, the 18% tax offset on Spouse Superannuation contributions will be extended to Spouse income of up to $37,000 from 1 July 2017. Given your wife’s income, she may qualify at that time.
Please consider the impact on your cash flow in making additional contributions to Super. Note you will be unable to access your Superannuation under normal conditions of release until you are age 60.